UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
X QUARTERLY REPORT PERSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT of 1934
For the quarterly period ended March 31, 1998
OR
_______ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to
_____________
Commission Registrant; State of Incorporation; IRS Employer
File Number Address; and Telephone Number Identification No.
1-11603 SIGCORP, Inc. 35-1940620
(An Indiana Corporation)
20 N. W. Fourth Street
Evansville, Indiana 47741-0001
(812) 465-5300
1-3553 Southern Indiana Gas and Electric Company 35-0672570
(An Indiana Corporation)
20 N. W. Fourth Street
Evansville, Indiana 47741-0001
(812) 465-5300
Indicate by check mark whether the Registrants (1) have
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
Registrants were required to file such reports), and (2)
have been subject to such filing requirements for the past
90 days.
Yes X . No __.
Indicate the number of shares outstanding of each of the
Registrants' classes of common stock, as of the latest
practicable date:
SIGCORP, Inc.: Common stock, no par value, 23,630,568 shares
outstanding at March 31, 1998
Southern Indiana Gas
and Electric Company: Common stock, no par value, 15,754,826 shares
outstanding and held by SIGCORP,
Inc. at March 31, 1998
SIGCORP, Inc.
AND
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1998
TABLE OF CONTENTS
Page No.
PART I. FINANCIAL INFORMATION:
Item 1: Financial Statements
SIGCORP, Inc.
Consolidated Statements of Income 2
Consolidated Statements of Cash Flows 3
Consolidated Balance Sheets 4-5
Consolidated Statements of Capitalization 6
Consolidated Statements of Retained Earnings 7
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
Statements of Income 8
Statements of Cash Flows 9
Balance Sheets 10-11
Statements of Capitalization 12
Statements of Retained Earnings 13
NOTES TO FINANCIAL STATEMENTS OF SIGCORP, Inc.
AND SOUTHERN INDIANA GAS AND ELECTRIC COMPANY 14-15
Item 2: Management's Discussion and Analysis of
Results of Operations and Financial Condition 16-18
SIGCORP, Inc. AND SOUTHERN INDIANA GAS
AND ELECTRIC COMPANY
Part II. OTHER INFORMATION
Item 4: Submission of Matters to a Vote of
Security Holders 19
Item 5: Other information 19
Item 6: Exhibits and Reports on Form 8-K 19
Signatures 20
2
SIGCORP, Inc.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31,
1998 1997
(in thousands except per share amounts)
OPERATING REVENUES:
Electric utility $ 65,227 $ 64,877
Gas utility 29,918 33,857
Energy services and other 45,926 8,838
Total operating revenues 141,071 107,572
OPERATING EXPENSES:
Fuel for electric generation 14,907 14,722
Purchased electric energy 1,686 1,929
Cost of gas sold 20,258 25,002
Cost of energy services and other 45,219 8,347
Other operation expenses 15,364 14,436
Maintenance 5,464 6,262
Depreciation and amortization 10,701 10,079
Property and other taxes 3,592 3,375
Total operating expenses 117,191 84,152
OPERATING INCOME 23,880 23,420
INTEREST AND OTHER CHARGES:
Interest on long-term debt 5,460 4,512
Interest expense on short-term debt 302 699
Amortization of premium, discount
and expense on debt 168 168
Allowance for funds used during construction (338) (200)
Preferred dividend requirements of subsidiary 274 274
Interest income (936) (696)
Other, net (4,666) (1,164)
Total interest and other charges 264 3,593
INCOME BEFORE INCOME TAXES 23,616 19,827
Federal and state income taxes 7,190 6,714
NET INCOME $ 16,426 $ 13,113
AVERAGE COMMON SHARES OUTSTANDING 23,631 23,631
BASIC EARNINGS PER SHARE OF COMMON STOCK $ 0.70 $ 0.55
DILUTED EARNINGS PER SHARE OF COMMON STOCK $ 0.69 $ 0.55
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</FN>
3
SIGCORP, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
1998 1997
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 16,426 $ 13,113
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 10,701 10,029
Preferred dividend requirements of subsidiary 274 274
Deferred income taxes and investment
tax credits, net (7,775) (101)
Change in assets and liabilities:
Receivables, net (including accrued
unbilled revenues) 4,321 13,886
Inventories 2,884 6,646
Accounts payable (13,827) (10,832)
Accrued taxes 18,179 8,459
Refunds from gas suppliers (297) (648)
Refunds to customers 390 (1,409)
Other assets and liabilities 15,746 12,147
Net cash provided by operating activities 47,027 49,899
CASH FLOWS FROM INVESTING ACTIVITIES
Construction expenditures (net of allowance for
other funds used during construction) (11,159) (8,889)
Demand side management program expenditures (152) (618)
Sale of leveraged lease 7,609 -
Purchases of investments (1,861) 148
Investments in partnerships 65 754
Change in nonutility property (2,558) (2,293)
Other 154 703
Net cash used in investing activities (7,902) (10,195)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (7,423) (7,246)
Change in environmental improvement
funds held by trustee (37) (69)
Payments on partnership obligations (1,639) (1,734)
Change in long-term notes payable 20,000 (162)
Change in current notes payable (27,197) (20,136)
Other 128 124
Net cash used in financing activities (16,168) (29,223)
NET INCREASE IN CASH AND CASH EQUIVALENTS 22,957 10,481
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 5,827 9,192
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 28,784 $ 19,673
<FN>
The accompanying notes to Consolidated Financial Statements are an
integral part of these statements.
</FN>
4
SIGCORP, Inc.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
1998 1997
(in thousands)
ASSETS
UTILITY PLANT, at original cost:
Electric $ 1,098,957 $ 1,091,349
Gas 142,211 141,646
1,241,168 1,232,995
Less accumulated provision for depreciation 567,507 557,631
673,661 675,364
Construction work in progress 34,504 32,241
Net utility plant 708,165 707,605
OTHER INVESTMENTS AND PROPERTY:
Investments in leveraged leases 35,355 42,964
Investments in partnerships and
limited liability corporations 18,751 19,076
Environmental improvement funds
held by trustee 4,139 4,102
Notes receivable 21,849 21,404
Nonutility property and other 16,736 14,624
Total other investments and property 96,830 102,170
CURRENT ASSETS:
Cash and cash equivalents 28,784 5,827
Temporary investments, at market 2,610 749
Receivables, less allowance of $443
and $328, respectively 53,305 52,496
Accrued unbilled revenues 17,190 22,320
Inventories 30,571 32,930
Current regulatory assets 8,885 11,749
Other current assets 2,935 3,250
Total current assets 144,280 129,321
OTHER ASSETS:
Unamortized premium on reacquired debt 4,585 4,704
Postretirement benefits other than pensions 2,693 3,263
Demand side management programs 24,468 24,467
Allowance inventory 2,093 2,093
Deferred charges 16,418 16,273
Total other assets 50,257 50,800
TOTAL $ 999,532 $ 989,896
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</FN>
5
SIGCORP, Inc.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
March 31, December 31,
1998 1997
(in thousands)
SHAREHOLDERS' EQUITY AND LIABILITIES
CAPITALIZATION:
Common Stock $ 78,258 $ 78,258
Retained Earnings 280,104 270,828
Total common shareholders' equity 358,362 349,086
Cumulative Nonredeemable Preferred
Stock of Subsidiary 11,090 11,090
Cumulative Redeemable Preferred
Stock of Subsidiary 7,500 7,500
Cumulative Special Preferred
Stock of Subsidiary 924 924
Long-Term Debt, net of current maturities 272,037 273,707
Long-Term Partnership Obligations,
net of current maturities 2,711 2,424
Total capitalization, excluding bonds
subject to tender (see Consolidated
Statements of Capitalization) 652,624 644,731
CURRENT LIABILITIES:
Current Portion of Adjustable Rate
Bonds Subject to Tender 53,700 31,500
Current Maturities of Long-Term Debt,
Interim Financing and Long-Term
Partnership Obligations:
Maturing long-term debt 12,400 12,695
Notes payable 13,946 41,368
Partnership obligations 213 2,139
Total current maturities of long-term
debt, interim financing and long-term
partnership obligations 26,559 56,202
Other Current Liabilities:
Accounts payable 33,915 47,741
Dividends payable 123 123
Accrued taxes 24,048 5,868
Accrued interest 8,354 5,216
Refunds to customers 1,247 1,155
Other accrued liabilities 25,223 17,866
Total other current liabilities 92,910 77,969
Total current liabilities 173,169 165,671
OTHER LIABILITIES:
Accumulated deferred income taxes 139,898 146,218
Accumulated deferred investment tax
credits, being amortized over lives
of property 19,887 20,249
Postretirement benefits other than pensions 12,321 11,271
Other 1,633 1,756
Total other liabilities 173,739 179,494
TOTAL $ 999,532 $ 989,896
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
</FN>
6
SIGCORP, Inc.
CONSOLIDATED STATEMENTS OF CAPITALIZATION
(Unaudited)
March 31, December 31,
1998 1997
(in thousands)
COMMON SHAREHOLDERS' EQUITY
Common stock, without par value, authorized
50,000,000 shares, issued 23,630,568 shares $ 78,258 $ 78,258
Retained earnings, $2,194,121 restricted as
to payment of cash dividends on common stock 280,104 270,828
Total common shareholders' equity 358,362 349,086
PREFERRED STOCK OF SUBSIDIARY
Cumulative, $100 par value, authorized
800,000 shares issuable, in series:
Nonredeemable
4.8% Series, outstanding 85,895 shares,
callable at $110 per share 8,590 8,590
4.75% Series, outstanding 25,000 shares,
callable at $101 per share 2,500 2,500
Total nonredeemable preferred stock
of subsidiary 11,090 11,090
Redeemable
6.50% Series, outstanding 75,000 shares
redeemable at $100 per share
December 1, 2002 7,500 7,500
SPECIAL PREFERRED STOCK OF SUBSIDIARY
Cumulative, no par value, authorized
5,000,000 shares,issuable in series:
8-1/2% series, outstanding 9,237
shares, redeemable at $100 per share 924 924
LONG-TERM DEBT, NET OF CURRENT MATURITIES
First mortgage bonds 216,515 238,420
Notes payable 56,223 36,000
Unamortized debt premium and discount, net (701) (713)
Total long-term debt 272,037 273,707
LONG-TERM PARTNERSHIP OBLIGATIONS,
NET OF CURRENT MATURITIES 2,711 2,424
CURRENT PORTION OF ADJUSTABLE RATE POLLUTION
CONTROL BONDS SUBJECT TO TENDER, DUE
2025, Series A, presently 3.65% 31,500 31,500
2030, Series C, presently 3.70% 22,200 -
53,700 31,500
TOTAL CAPITALIZATION, including bonds
subject to tender $ 706,324 $ 676,231
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</FN>
7
SIGCORP, Inc.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(Unaudited)
Three Months Ended
March 31,
1998 1997
(in thousands)
Balance Beginning of Period $ 270,828 $ 252,626
Net Income 16,426 13,113
287,254 265,739
Common Stock Dividends ($0.3025 per
share in 1998 and $0.2950 per share in 1997) 7,150 6,979
Balance End of Period (See Consolidated
Statements of Capitalization
for restriction) $ 280,104 $ 258,760
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</FN>
8
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY, INC.
STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
March 31,
1998 1997
(in thousands except per share amounts)
OPERATING REVENUES:
Electric $ 65,227 $ 64,876
Gas 29,918 33,857
Total operating revenues 95,145 98,733
OPERATING EXPENSES:
Fuel for electric generation 15,794 14,723
Purchased electric energy 1,686 1,929
Cost of gas sold 20,258 25,002
Other operation expenses 13,810 13,249
Maintenance 5,409 6,224
Depreciation and amortization 10,632 10,029
Federal and state income taxes 7,640 7,216
Property and other taxes 3,497 3,312
Total operating expenses 78,726 81,684
OPERATING INCOME 16,419 17,049
OTHER INCOME:
Allowance for other funds used
during construction (5) 101
Interest 67 133
Other, net 1,599 668
Total other income 1,661 902
INCOME BEFORE INTEREST AND OTHER CHARGES 18,080 17,951
INTEREST AND OTHER CHARGES:
Interest on long-term debt 4,806 4,512
Amortization of premium, discount,
and expense on debt 168 168
Other interest 412 384
Allowance for borrowed funds used
during construction (343) (99)
Total interest and other charges 5,043 4,965
NET INCOME 13,037 12,986
Preferred dividend 274 274
EARNINGS APPLICABLE TO COMMON STOCK $ 12,763 $ 12,712
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</FN>
9
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
1998 1997
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 13,037 $ 12,986
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 10,632 10,029
Deferred income taxes and investment tax
credits, net (721) (739)
Allowance for other funds used
during construction 5 (101)
Change in assets and liabilities:
Receivables, net (including accrued
unbilled revenues) 7,649 13,599
Inventories 2,911 6,646
Accounts payable (12,697) (11,013)
Accrued taxes 10,922 8,270
Refunds from gas suppliers (297) (648)
Refunds to customers 389 (1,409)
Other assets and liabilities 12,739 11,641
Net cash provided by operating activities 44,569 49,261
CASH FLOWS FROM INVESTING ACTIVITIES
Construction expenditures (net of allowance for
other funds used during construction) (11,160) (8,889)
Demand side management program expenditures (152) (618)
Other (38) (85)
Net cash used in investing activities (11,350) (9,592)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (7,423) (7,246)
Change in environmental improvement
funds held by trustee (37) (69)
Change in long-term notes payable 20,000 -
Change in current notes payable (41,829) (18,000)
Other 131 125
Net cash used in financing activities (29,158) (25,190)
NET INCREASE IN CASH AND CASH EQUIVALENTS 4,061 14,479
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 1,114 3,127
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 5,175 $ 17,606
<FN>
The accompanying notes to Consolidated Financial Statements are an
integral part of these statements.
</FN>
10
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
BALANCE SHEETS
(Unaudited)
March 31, December 31,
1998 1997
(in thousands)
ASSETS
UTILITY PLANT, at original cost:
Electric $ 1,098,957 $1,091,349
Gas 142,212 141,646
1,241,169 1,232,995
Less accumulated provision for depreciation 567,507 557,631
673,662 675,364
Construction work in progress 34,504 32,241
Net utility plant 708,166 707,605
OTHER INVESTMENTS AND PROPERTY:
Environmental improvement funds
held by trustee 4,139 4,102
Nonutility property and other 1,552 1,552
Total other investments and property 5,691 5,654
CURRENT ASSETS:
Cash and cash equivalents 5,175 1,114
Receivables, less allowance of $406 and
$328, respectively 31,957 32,281
Notes Receivable 112 -
Accrued unbilled revenues 17,190 22,320
Inventories 29,593 32,504
Current regulatory assets 8,885 11,749
Other current assets 1,710 1,443
Total current assets 94,622 101,411
OTHER ASSETS:
Unamortized premium on reacquired debt 4,585 4,704
Postretirement benefits other than pensions 2,693 3,263
Demand side management program 24,468 24,467
Allowance inventory 2,093 2,093
Deferred charges 15,156 15,266
Total other assets 48,995 49,793
TOTAL $ 857,474 $ 864,463
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</FN>
11
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
BALANCE SHEETS
(Unaudited)
March 31, December 31,
1998 1997
(in thousands)
SHAREHOLDERS' EQUITY AND LIABILITIES
CAPITALIZATION:
Common Stock $ 78,258 $ 78,258
Retained Earnings 234,184 228,570
Total common shareholders' equity 312,442 306,828
Cumulative Nonredeemable Preferred
Stock of Subsidiary 11,090 11,090
Cumulative Redeemable Preferred
Stock of Subsidiary 7,500 7,500
Cumulative Special Preferred
Stock of Subsidiary 924 924
Long-Term Debt, net of current maturities 236,814 238,707
Total capitalization, excluding bonds
subject to tender (see Consolidated
Statements of Capitalization) 568,770 565,049
CURRENT LIABILITIES:
Current Portion of Adjustable Rate Bonds
Subject to Tender 53,700 31,500
Current Maturities of Long-Term Debt and
Interim Financing:
Maturing long-term debt 12,400 12,695
Notes payable 627 31,643
Notes payable to Associated Company 10,072 20,886
Total current maturities of long-term debt
and interim financing 23,099 65,224
Other Current Liabilities:
Accounts payable 14,369 27,066
Dividends payable 123 123
Accrued taxes 16,847 5,925
Accrued interest 7,822 4,635
Refunds to customers 1,247 1,155
Other accrued liabilities 22,430 16,018
Total other current liabilities 62,838 54,922
Total current liabilities 139,637 151,646
OTHER LIABILITIES:
Accumulated deferred income taxes 115,226 114,493
Accumulated deferred investment tax
credits, being amortized over
lives of property 19,887 20,249
Postretirement benefits other than pensions 12,321 11,271
Other 1,633 1,755
Total other liabilities 149,067 147,768
TOTAL $ 857,474 $ 864,463
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</FN>
12
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
STATEMENTS OF CAPITALIZATION
(Unaudited)
March 31, December 31,
1998 1997
(in thousands)
COMMON SHAREHOLDERS' EQUITY
Common stock, without par value, authorized
50,000,000 shares, issued 15,754,826 shares $ 78,258 $ 78,258
Retained earnings, $2,194,121 restricted as
to payment of cash dividends on common stock 234,184 228,570
Total common shareholders' equity 312,442 306,828
PREFERRED STOCK OF SUBSIDIARY
Cumulative, $100 par value, authorized
800,000 shares issuable, in series:
Nonredeemable
4.8% Series, outstanding 85,895 shares,
callable at $110 per share 8,590 8,590
4.75% Series, outstanding 25,000 shares,
callable at $101 per share 2,500 2,500
Total nonredeemable preferred
stock of subsidiary 11,090 11,090
Redeemable
6.50% Series, outstanding 75,000 shares
redeemable at $100 per share
December 1, 2002 7,500 7,500
SPECIAL PREFERRED STOCK OF SUBSIDIARY
Cumulative, no par value, authorized
5,000,000 shares, issuable in series:
8-1/2% series, outstanding 9,237
shares, redeemable at $100 per share 924 924
LONG-TERM DEBT, NET OF CURRENT MATURITIES
First mortgage bonds 216,515 238,420
Notes payable 21,000 1,000
Unamortized debt premium and discount, net (701) (713)
Total long-term debt 236,814 238,707
CURRENT PORTION OF ADJUSTABLE RATE POLLUTION
CONTROL BONDS SUBJECT TO TENDER, DUE
2025, Series A, presently 3.65% 31,500 31,500
2030, Series C, presently 3.70% 22,200 -
53,700 31,500
TOTAL CAPITALIZATION, including bonds
subject to tender $ 622,470 $ 596,549
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</FN>
13
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
STATEMENTS OF RETAINED EARNINGS
(Unaudited)
Three Months Ended
March 31,
1998 1997
(in thousands)
Balance Beginning of Period $ 228,570 $ 213,688
Net Income 13,037 12,986
241,607 226,674
Preferred Stock Dividends 274 274
Common Stock Dividends 7,149 6,979
7,423 7,253
Balance End of Period (See Consolidated
Statements of Capitalization for restriction) $ 234,184 $ 219,421
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</FN>
14
SIGCORP, Inc.
AND
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization
SIGCORP, Inc. (SIGCORP) is a holding company
incorporated October 19, 1994 under the laws of the state of
Indiana. SIGCORP has nine wholly-owned subsidiaries:
Southern Indiana Gas and Electric Company (SIGECO), which
accounts for over 90% of SIGCORP's net income, a gas and
electric utility, and eight nonregulated subsidiaries.
2. General
It is suggested that these consolidated financial
statements be read in conjunction with the consolidated
financial statements and the notes thereto included in
SIGCORP's 1997 Annual Report to Shareholders.
The consolidated statements include the accounts of
SIGCORP, Inc. and its wholly-owned subsidiaries, Southern
Indiana Gas and Electric Company (SIGECO), Southern Indiana
Properties, Inc. (SIPI), Energy Systems Group, Inc. (ESGI),
Southern Indiana Minerals, Inc. (SIMI), ComSource, Inc.
(ComSource), SIGCORP Energy Services, Inc. (Energy), SIGCORP
Capital, Inc. (Capital), SIGCORP Communications, Inc.
(Communications) and SIGCORP Fuels, Inc. (Fuels) and include
all adjustments which are, in the opinion of management,
necessary for a fair statement of the financial position and
results of operations. Because of seasonal and other
factors, the earnings for the three months ending March 31,
1998 should not be taken as an indication for all or any
part of the balance of 1998.
3. Cash Flow Information
For the purposes of the Consolidated Balance Sheets and
Consolidated Statements of Cash Flows, SIGCORP and SIGECO
consider all highly liquid debt instruments purchased with
an original maturity of three months or less to be cash
equivalents.
SIGCORP, for the three months ended March 31, 1998 and
1997 paid interest (net of amounts capitalized) of
$1,781,000 and $1,893,000, respectively, and income taxes of
$15,000 and $749,000, respectively. Additionally, SIGCORP
is involved in several partnerships which are partially
financed by partnership obligations amounting to $2,924,000
and $4,563,000 at March 31, 1998 and December 31, 1997,
respectively.
SIGECO, for the three months ended March 31, 1998 and
1997 paid interest (net of amounts capitalized) of
$1,688,000 and $1,752,000, respectively, and income taxes of
$745,000 and $745,000, respectively.
4. Long-Term Debt
On March 25, 1998 SIGECO refunded the following four
tax-exempt bond issues:
* 1985 Series B Adjustable Rate Pollution Control
Bonds, $31,500,000, presently at 4.05% interest rate, due
2015
* 1973 Series A Fixed Rate Pollution Control Bonds,
$4,640,000, at 5.6% interest rate, due 2003
* 1978 Series A Fixed Rate Pollution Control Bonds,
$22,000,000, at a 6.05% interest rate, due 2008
* 1983 Series A Adjustable Rate Pollution control
Bonds, $22,200,000, presently at a 4.65% interest rate, due
2028
The above issues were refunded with following bond
issues:
* 1998 Series A Adjustable Rate Pollution Control
Bonds, $31,500,000, presently at a 3.65% interest rate, due
2025
* 1998 Series B Fixed Rate Pollution Control Bonds,
$4,640,000, presently at a 4.4% interest rate, due 2020
* 1998 Series B Fixed Rate Pollution Control Bonds,
$22,000,000, presently at a 4.4% interest rate, due 2030
* 1998 Series C Adjustable Rate Pollution Control
Bonds, $22,200,000, presently at a 3.7% interest rate, due
2030
The interest rates on the 1998 Series A and C Adjustable
Rate Pollution Control Bonds are fixed through February 28,
1999. The interest rates on the Series B Fixed Rate
Pollution Control Bonds are fixed through February 28, 2003.
The Series A and C Adjustable Rate Pollution Control Bonds
are subject to tender on March 1, 1999 and accordingly, are
presented as current liabilities on the financial
statements. The Series B Fixed Rate Pollution Control Bonds
are subject to tender March 1, 2003.
In January 1998, SIGECO borrowed $20 million under a
floating rate long term bank note, due April 1, 1999, and
refunded an equal amount of short-term bank notes. The
interest rate, presently 6.3% will be reset every 90 days
based upon the 90-day LIBOR plus 62.5 basis points
5. Earnings Per Share
The following table illustrates the basic and diluted
earnings per share calculations.
Three Months Ended Three Months Ended
March 31, 1998 March 31, 1997
Net Per Share Net Per Share
Income Shares Amount Income Shares Amount
(in thousands except for per share amounts)
Basic EPS $16,426 23,631 $0.70 $13,113 23,631 $0.55
Effect of
dilutive
securities 96 44
Diluted EPS $16,426 23,727 $0.69 $13,113 23,675 $0.55
Basic earnings per common share were computed by
dividing net income by the weighted average number of shares
of common stock outstanding during the year. Diluted
earnings per common share were determined using the treasury
stock method for dilutive stock options.
6. Comprehensive Income
Effective January 1, 1998, SIGCORP adopted Statement of
Financial Accounting Standards No. 130, "Reporting
Comprehensive Income", which requires expanded disclosures
regarding financial results.
The following table is presented to comply with this new
standard:
Three Months Ended
March 31, 1998 March 31, 1997
(in thousands)
Net Income $ 16,426 $ 16,426
Unrealized gains or losses on
marketable securities - -
Comprensive income $ 16,426 $ 16,426
16
SIGCORP, Inc.
AND
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The consolidated financial statements of SIGCORP, Inc.
(SIGCORP), an investor-owned holding company, include
SIGCORP's principal subsidiary, Southern Indiana Gas and
Electric Company (SIGECO), a regulated gas and electric
utility, and eight nonregulated subsidiaries. The following
discussion and analysis includes those factors which have,
or may, materially affect the results of operations and
financial condition of SIGCORP and its subsidiaries.
This discussion includes forward looking statements based on
information currently available to management. Such
statements are subject to certain risks and uncertainties.
These statements typically contain, but are not limited to
the term "anticipate", "expect", "potential", "estimate" and
similar words, and actual results may differ materially due
to the speed and nature of increased competition and
deregulation in the electric and gas utility industry,
economic or weather conditions affecting future sales and
margins, changes in markets for energy services, changing
energy market prices, legislative and regulatory changes
including revised environmental requirements, availability
and cost of capital, and other similar factors.
RESULTS OF OPERATIONS
Basic earnings per share were $.70 for the three month
period ending March 31, 1998 compared to basic earnings of
$.55 per share for the first quarter of 1997. The factors
effecting the $.15 increase in earnings follow:
Period ended March 31, 1997 $.55
Weather (.05)
Electric sales to other utilities
and power marketers .02
Nonregulated gas energy services and
nonutility operations .15
Other (customer growth, etc.) .03
Period ended March 31, 1998 $.70
REVENUES Electric revenues were $400,000 higher during the
first quarter of 1998 compared to the same period a year ago
due primarily to an increase in electric sales. The revenue
impact of the increase in sales was substantially offset by
lower per unit fuel costs reflected in revenue and a less
favorable sales mix. Changes in the cost of fuel are passed
on to customers through commission approved fuel cost
adjustments. The sales increase was primarily attributed to
a 17% increase in wholesale sales combined with 9% greater
sales to industrial customers during the current quarter.
The increase in wholesale electric sales, which typically
have lower per unit margins than retail sales, was primarily
due to 39% greater sales to other utilities and power
marketers reflecting SIGECO's competitive rates and
continuing efforts to aggressively sell its electric energy
in new markets. Warmer winter temperatures during the
current quarter caused residential electric sales to decline
5%.
17
Fewer sales to all customer classes was the chief cause of a
$3.9 million (12%) decrease in gas revenues during the
quarter ended March 31, 1998. Winter temperatures were 21%
warmer than normal and 14% warmer than a year ago, as
measured in "heating degree days", in SIGECO's service area,
causing weather-sensitive residential gas sales to decrease
13%. Sales to commercial and industrial customers declined
18% in total, when fewer SIGECO transportation customers
purchased their gas supplies from SIGECO than during the
first quarter of 1997. A 23% increase in transported gas
volumes resulted in a decline of only 2% in total gas
throughput (sales and transportation), reflecting greater
usage by SIGECO's commercial and industrial customers during
the current period. Additionally, a 5% decrease in per unit
gas costs caused a $1.0 million decrease in gas revenues.
Changes in the cost of gas are passed on to customers
through commission approved gas cost adjustments.
The greater activity of SIGCORP's natural gas marketing
subsidiary, SIGCORP Energy Services, whose revenues were up
$36.4 million, was the primary reason for a $37.1 million
increase in energy services and other nonregulated revenues
during the quarter ending March 31, 1998.
OPERATING EXPENSES Due to lower per unit fuel costs, total
costs for fuel for electric generation and purchased
electric energy decreased slightly during the three month
period ending March 31, 1998, despite a 6% increase in total
electric sales. Cost of gas sold declined $4.7 million
(19%) during the first quarter of 1998 reflecting 15% lower
sales in the quarter. The cost of energy services and other
revenues, which was chiefly the cost of natural gas
purchased for resale by Energy, increased $36.9 million
during the current quarter, compared to the same period in
1997. Other operation and maintenance expenses during the
first quarter of 1998 were comparable in total to the same
period a year ago due primarily to lower electric generating
plant maintenance expenditures and decreases in various
administrative and general expenses, which offset higher
generating plant operation expenses and higher customer
assistance program costs and expenses related to efforts to
prepare for competition.
INTEREST AND OTHER CHARGES Total interest and other charges
declined $3.3 million during the three months ending March
31, 1998, compared to the first quarter of 1997, due to
substantially greater other nonutility income, which
included a $2.9 million after-tax gain on the sale of
Southern Indiana Properties' ownership interest in a paper
mill, the first quarter of operation of the company's
SIGCORP Fuels subsidiary which mines and markets coal, and
improved results of other nonutility subsidiaries.
Increases in total interest expense reflected increased
financial investment activities by Southern Indiana
Properties, Inc. and the related costs.
EARNINGS Earnings per share for the first quarter of 1998
rose $.15 (27%) compared to the same period in 1997 due
primarily to the improved nonutility income. The impacts of
increased electric sales to other utilities and power
marketers and higher margins were offset by lower weather-
sensitive gas and electric sales.
LIQUIDITY AND CAPITAL RESOURCES
CAPITAL REQUIREMENTS SIGCORP's demand for capital is
primarily related to SIGECO's construction of utility plant
and equipment necessary to meet customers' electric and gas
energy needs, as well as environmental compliance
requirements, and expenditures for SIGECO's demand side
management (DSM) programs. Construction expenditures
(excluding allowance for other funds used during
construction) and DSM program expenditures incurred during
the quarter ending March 31, 1998 totaled $11.3 million and
were fully funded with internally generated cash. Cash
provided from operations decreased $2.9 million during the
18
current three month period compared to the same period in
1997. Cash used in investing and financing activities
during 1998 decreased $15.3 million compared to a year ago.
SIGCORP estimates that SIGECO's construction expenditures
for the five year period 1998-2002 will total approximately
$315 million, including approximately $15 million to
complete several comprehensive information systems which are
necessary to fulfill expanding customer service needs and to
better manage SIGECO's resources, and approximately $5
million to develop and implement DSM programs, but exclude
construction expenditures that may be required to comply
with new USEPA air quality standards discussed in
"Environmental Matters" in Management's Discussion and
Analysis of Results of Operations and Financial Condition in
SIGCORP's 1997 Form 10-K which could range from estimates of
$10 million to $90 million.
FINANCING ACTIVITIES Financing activity during the first
quarter of 1998 included a $20 million increase in long-term
notes payable to refund $20 million of SIGECO's short-term
notes payable. Additionally, SIGECO refunded $80.3 million
of tax-exempt bond issues with an equal amount of tax-exempt
bonds (see Note 4 of the Notes to Consolidated Financial
Statements in this filing) which will reduce total interest
expense on a present value basis by $8.5 million over the
remaining lives of the original bond issues.
SIGCORP expects the majority of the construction
requirements and an estimated $66 million in debt security
redemptions to be provided by internally generated funds.
External financing requirements of $60-70 million are
anticipated and will be used primarily to redeem long-term
debt. These estimates do not reflect construction
expenditures that may be required to comply with new USEPA
air quality standards.
19
PART TWO - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders
(a) The annual meeting of shareholders was held at
3:00 P.M. (CDT) on April 28, 1998, with the following
actions taken:
(b) The following three individuals were re-elected
as directors of SIGECO for three year terms:
Andrew E. Goebel, Donald A. Rausch and Richard W. Shymanski.
The appointment of Arthur Andersen LLP as independent
auditors of SIGCORP, Inc. for 1998 was ratified.
(c) The following table shows the voting results as
to each matter considered by the shareholders:
Item 1: Vote for Election of Directors
Total Votes Cast: 19,947,772
Nominee Votes For Votes Withheld
Andrew E. Goebel 19,771,834 175,938
Donald A. Rausch 19,748,159 199,613
Richard W. Shymanski 19,764,027 183,745
Item 2: Ratification of Appointment of Auditors
Total Votes Cast: 19,947,720
For Against Abstain
19,524,044 79,791 343,885
Item 5. Other Information
NONE
Item 6. Exhibits and Reports on Form 8-K
On March 6, 1998, SIGCORP, Inc. filed with
Form 8-K the following:
- SIGCORP, Inc.'s audited consolidated financial
statements for the year ended December 31, 1997;
- computation of ratio of earnings to fixed
charges (1993 - 1997),
- computation of ratio of earnings to fixed
charges and preferred dividends; and,
- consent of independent public accountants,
in conjunction with the refinancing of certain of
SIGECO's tax-exempt pollution control bonds.
<page 20>
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned
thereunto duly authorized.
SIGCORP, Inc
(Registrant)
/s/ T. L. Burke
T. L. Burke
Secretary and Treasurer
Date May 15, 1998
SOUTHERN INDIANA GAS AND
ELECTRIC COMPANY
/s/ S. M. Kerney
S. M. Kerney
Controller
Date May 15, 1998